Update Cisco Systems (CSCO)
Cisco Systems (CSCO) rules the technology that runs the Internet, but it’s got a few things to learn about product announcements. On March 9 the company held a teleconference staged with all the hoopla of Apple (AAPL) announcing a new iPhone. But then Cisco unveiled a new core carrier routing platform with the catchy name of CRS-3.
The stock actually dropped 26 cents a share the day after the teleconference.
I can understand the investor disappointment. The CRS-3 isn’t an iPhone-like consumer product.
Update Marvell Technology Group (MRVL)
After the market closed yesterday (March 4) Marvell Technology Group (MRVL) reported fourth quarter fiscal 2010 earnings of 40 cents a share (excluding items). That was 3 cents a share above the official Wall Street consensus. Revenue climbed 64% from the fourth quarter of fiscal 2009 to $843 million, just a tad above analyst consensus. Strength came in storage (sales up 5%) and networking (sales up 10%).
The best news in the current quarter, however, came on gross margins, which climbed 2.2 percentage points to hit 60%. That’s an all-time high for the chip company and is significantly above the 58.6% gross margin expected by Wall Street.
Normally the first quarter of the company’s fiscal year—the quarter that ends in April—shows a 7% to 10% seasonal decline in sales. In that context Marvell Technology Group’s guidance to Wall Street for a flat to 2% decline in that quarter counts as a sign of major continuing strength for the company. So too does the company’s increase in gross margin targets going forward to 58% to 60%. That indicates that Marvell believes the new margins are sustainable and the savings from its cost reduction program aren’t based on one-time gimmicks.
The conference call wasn’t completely sunshine and buttercups, however.
Update Cisco Systems (CSCO)
The recession is certainly over for Cisco Systems (CSCO). Today, February 3, after the market close the company reported earnings for the quarter that ended in January (Cisco’s second quarter of fiscal 2010) of 40 cents a share. That was 5 cents a share better than Wall Street projections.
Tech stocks had already finished strong for the day before Cisco reported. The positive surprise could be enough to keep what was one of the weakest sectors in January on the mend. (For more on the January slide in the technology sector and what it means for the market as a whole see my post http://jubakpicks.com/2010/01/28/odds-that-this-is-a-10-correction-and-not-just-5-rise-as-tech-stocks-sink/ )
Chances are pretty good since unlike a lot of tech companies that have followed great earnings reports with disappointing guidance, Cisco raised projections for the next quarter in its conference call.
Update Qualcomm (QCOM)
Companies have characters.
If you had a friend like Intel (INTC), for example, you know he’d be up late at night figuring out a way to make the family car run just a bit better than everyone else’s.
If you had a friend like Wal-Mart (WMT), you wouldn’t be surprised to find him out in his backyard on a Saturday building a big shed to hold all the stuff he bought cheap in bulk.
And if you had a friend like Qualcomm (QCOM), he would drive you crazy by never telling you what he was going to do until well after it happened.
I’ve owned Qualcomm off and on over the last decade and I’ve got the scars to prove it. This company just can’t seem to figure out how to tell Wall Street when enthusiasm is running too high and earnings are about to disappoint.
And that’s exactly what happened—again—when the company announced earnings for the first quarter of the 2010 fiscal year after the market close on January 27.
The problem wasn’t what the company said about earnings for the just completed quarter. Qualcomm reported earnings of 62 cents a share, 6 cents a share above Wall Street expectations.
It was the surprisingly dour guidance for the second quarter that did the damage. Second quarter revenue will be just $2.4 billion to $2.6 billion. That’s way below analyst projections of $2.75 billion.
For the entire fiscal 2010 year the company told investors to expect $2.10 to $2.30 a share in earnings (Wall Street had been looking for $2.26) and revenue of $10.4 billion to $11 billion (Wall Street had projected $11.06 billion.)
Where did that come from? The guidance left analysts and investors scratching their heads. How come a company that is clearly beating competitors, gaining market share, and rolling out impressive new products at the rate that Qualcomm is won’t turn in better results for 2010?
Technology shares leading this rally so far
Technology stocks look placed to lead the market on both technicals and earnings.
After Friday’s sell off, the sector resumed an uptrend on Tuesday January 19 that stretches back to the late November lows. Strong results from Intel (INTC) on Thursday and IBM (IBM) argue that earnings will support the strong technical upward trend. Both companies announced fourth quarter earnings that beat Wall Street estimates.
There’s one part of the technology sector that’s looking especially strong.
